/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000607.MBX C L A S S A C T I O N R E P O R T E R Wednesday, June 7, 2000, Vol. 2, No. 110 Headlines ACCELR8 TECHNOLOGY: Rabin & Peckel Announces Securities Suit in CO ACCELR8 TECHNOLOGY: Wolf Haldenstein Files Securities Lawsuit in CO AUTO INSURANCE: Suit Says Allstate Collaborates with Claims Processors COCA-COLA: Chairman Remarked on Excessive Money Demands for Racism Suit FEN-PHEN: MDL Ct Hears Objections To AHP's Proposed $4.8 Bil Settlement FIRSTPLUS FINANCIAL: Ch 11 Class Claim Denied Prevents Single Claim G.A.D.R: NJ Ct Sends Dispute Over Hemophilia Settlement Back to IL GLEN COVE: Watery Home Residents Form Tenant Council and Plan Lawsuit INMATES LITIGATION: Ap Ct Hears Who Should Represent MS HIV Plaintiffs JACK IN: Settlements Resolve CA Accessibility Suit against Restaurants LIPARI LANDFILL: NJ Superfund Site Needs Fund for Cancer MORGAN STANLEY: Cited for Discrimination against Women Employees PEAK INTERNATIONAL: Reports Dismissal of Dorchester Investor Suit in NY SEAGATE TECHNOLOGY: Faces 17 Securities Suits over Merger Agreement TOBACCO LITIGATION: Financial Expert Said Industry Is Worth $157 Bil TOBACCO LITIGATION: Philip Morris Will Drop Magazine Ads Read By Youths TUBE TURNS: Insurance Carrier Defends Coker Plant Explosion Suit WATER CONTAMINATION: Scramble under Way to Launch Actions WATER CONTAMINATION: Seattle Atty. Warns of E. Coli Risk to Americans * 35% of People Surveyed Think it's OK to Inflate Insurance Claims * Most Americans Surveyed Favor Reform of the Class Action System ********* ACCELR8 TECHNOLOGY: Rabin & Peckel Announces Securities Suit in CO ------------------------------------------------------------------ A class action has been commenced in the United States District Court for the District of Colorado, on behalf of all persons or entities who purchased or otherwise acquired Accelr8 Technology Corporation common stock during the period from September 15, 1997 through November 16, 1999, inclusive (the "Class Period"). The Complaint alleges that Accelr8 and certain of its officers and directors violated section 10(b) of the Securities Exchange Act of 1934. In particular, it is alleged that defendants, among other things, materially overstated the Company's revenue, improperly recognized revenue relating to licensing and maintenance fees, failed to amortize capitalized software development costs, and failed to disclose that Accelr8's Navig8 2000 software, created to fix the millennium bug, was not available as a general Year 2000 remediation tool to the total universe of the programs that need Year 2000 solutions as represented during the Class Period. The Complaint alleges that, as a result of these material misstatements and omissions, Accelr8's stock price was artificially inflated through out the Class Period. Contact: Joseph V. McBride of Rabin & Peckel LLP, 800-497-8076, 212-682-1818, email@rabinlaw.com ACCELR8 TECHNOLOGY: Wolf Haldenstein Files Securities Lawsuit in CO ------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a securities class action lawsuit in the United States District Court for the District of Colorado on behalf of investors who bought Accelr8 Technology Corp. (Nasdaq: ACLY) stock between September 15, 1997 and November 16, 1999 (the "Class Period"). The lawsuit alleges that Accelr8, Thomas V. Geimer and Harry J. Fleury violated section 10(b) of the Securities Exchange Act of 1934. Specifically, plaintiff alleges that defendants materially overstated Accelr8's revenue, improperly recognized revenue relating to licensing and maintenance fees, failed to amortize capitalized software development costs, and failed to disclose that the Company's Navig8 2000 software, created to fix the millennium big, was not available as a general Year 2000 remediation tool to the total universe of the programs that need Year 2000 solutions as represented during the Class Period. The Complaint alleges, amongst other things, that, as a result of these material misstatements and omissions, the Company's stock price was artificially inflated throughout the Class Period. Contact: Michael Miske, George Peters, Fred Taylor Isquith, Esq., Gregory M. Nespole, Esq. or Brian S. Cohen, Esq., all of Wolf Haldenstein Adler Freeman & Herz LLP, 800-575-0735, or classmember@whafh.com AUTO INSURANCE: Suit Says Allstate Collaborates with Claims Processors ---------------------------------------------------------------------- A lawsuit filed in Edwardsville alleges that Allstate and two other insurance companies collaborated with claims processors to fraudulently undervalue customers' vehicle loss and medical claims. The lawsuit was filed last Friday June 2 by the Lakin Law Firm of Wood River on behalf of Howard Weaver of Madison County and four other plaintiffs who live outside the area. It asks that a judge certify the complaint as a class action of all who suffered similar losses. Defendants are Allstate Insurance Co., Unique Insurance, Grange Insurance, Automatic Data Processing Inc., ADP Claims Solutions Group and ADP Integrated Medical Solutions. The plaintiffs contend the insurance companies systematically underpaid claims using biased reports from the ADP companies. The lawsuit seeks damages amounting to the difference between the premiums actually paid and the fair market value of the low-quality insurance coverage that allegedly was provided. (St. Louis Post-Dispatch, June 6, 2000) CATERPILLAR INC: Boat Engine Buyers Denied Class Status ------------------------------------------------------- A federal judge has refused to certify a class action consumer's suit brought by boat owners who claim that Caterpillar Inc. falsely inflated fuel efficiency figures for its engines, finding it would be too difficult for the court to apply the consumer protection laws of 41 different states. "A class action is not the superior method of litigating this controversy because of potential difficulties with case management. Management problems are likely to result from the need to determine and apply the various states' consumer fraud acts," U.S. District Judge Anita B. Brody wrote in her 33-page opinion in Lyons v. Caterpillar Inc.Brody also found that the would-be class members could easily sue individually since the lead plaintiff had estimated that each class member's damages would be about $ 100,000. "Individual claims would certainly be large enough to make individual suits feasible and therefore, a class action lawsuit is not the superior method of adjudicating this dispute," Brody wrote.The individual boat owners who claim that Caterpillar misrepresented the fuel consumption rate of its engines, she said, "are not without effective strength to bring their opponent into court." The ruling means that plaintiff's attorneys Dante Mattioni and Stephen J. Galati of Mattioni Mattioni & Mattioni have only the claims of Paul Lyons to pursue. Lyons bought a 1995 Sea Ray 370 DB boat in August 1995. The boat had twin 3116, 300-horsepower diesel engines manufactured by Caterpillar. But Lyons claims the engines did not perform as warranted and specifically that they used more fuel and failed prematurely. He claims his boat's range was less than it would have been if the representations were accurate. The suit alleges that Caterpillar knew before the engines were sold and installed that the fuel efficiency figures were wrong but that it continued to published and disseminated the false specifications. The Mattioni firm asked that Lyons be allowed to sue on behalf of a class of up to 9,000 owners of boats in which Caterpillar 3116 marine engines have been installed. The plaintiffs argued that Illinois's consumer protection law should apply to every plaintiff under the Pennsylvania flexible interest analysis.But Caterpillar's lawyers argued that the court must apply the law of every state in which putative class members reside. They identified 41 states where the last known owners of the subject engines reside. Brody sided with the defense, saying, "I find that Illinois law would not apply to a certified class in this action."In diversity cases, she said, federal courts must apply the choice-of-law rules of the forum.Applying Pennsylvania's rules, Brody said the issue was whether any of the relevant consumer fraud acts conflict and if they do conflict, whether it is a "false conflict." Caterpillar argued that there are numerous differences between the states' statutes. Brody agreed, saying, "There is not a single jurisdiction that has a greater interest in having its consumer fraud act apply to the entire class."All of the states, she said, have an interest in using the statute crafted by their state's legislature to protect their consumers and residents." Even if applying one state's consumer fraud act would not impair another state's governmental interests, it may impair the governmental interests of any of the other 40 states involved," Brody wrote. Brody also refused to apply Pennsylvania's law to all of the plaintiffs. "Applying the Pennsylvania consumer fraud act to all the putative class members' claims would be a violation of the due process rights of those plaintiffs who do not live in Pennsylvania and/or who did not purchase their boats in Pennsylvania," she wrote. Under the Restatement (Second) of Conflict of Laws, Brody found that "each putative class member's claim arises under the consumer fraud act of his or her state of residence or the state in which his or her boat was purchased." U.S. District Judge Jerome Simandle of the District of New Jersey wrote in In re Ford Motor Co. Ignition Switch Products Liability Litigation, a suit involving the alleged defective ignition switch found in approximately 23 million vehicles, Simandle wrote: "Each plaintiff's home state has an interest in protecting its consumers from in-state injuries caused by foreign corporations and in delineating the scope of recovery for its citizens under its own laws. These interests arise by virtue of each state being the place in which plaintiffs reside, or the place in which plaintiffs bought and used their allegedly defective vehicles or the place where plaintiffs' alleged damages occurred." By the same logic, Brody found that all 41 consumer protection laws would apply in her case and that her next task was to determine if they could be "applied in such a way that common questions of law predominate." The Mattioni firm argued that they could because the consumer laws fall into four general categories: -- Statutes generally prohibiting unfair and deceptive practices or listing prohibited practices, which practices include the practice in question, without the need to show intent that there be reliance. -- Statutes with a general prohibition of unfair and deceptive practices or a list of specific practices which includes the practice in question where the defendant intends to induce reliance but do not require a specific intent to deceive or proof of actual reliance. -- Statutes which impose a scienter requirement (proof that the defendant intended that there be deception). -- Statutes that require proof of individual reliance by the plaintiff. But Brody disagreed, finding that the differences could not be addressed so simply."State consumer protection acts vary on a range of fundamental issues," Brody wrote. "For example, the New Jersey consumer protection act broadly proscribes 'any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact...' while the California statute specifically proscribes 23 itemized activities." The level of scienter also differs, she noted, so that plaintiffs in Massachusetts, Maine and Texas do not require proof of intent to deceive, while Georgia, New Jersey and Utah plaintiffs must prove intent. The statutes also vary on whether class action is available. Brody found that the Mattioni firm failed to provide the court with a detailed analysis of the 41 states' consumer fraud acts that was sufficient to analyze the entire question. "My failed attempt to make sense of plaintiff's sample jury instructions illustrates why plaintiff has not met his burden. If I find plaintiff's jury instructions confusing, how can I expect a lay jury to wade through these question?" she wrote.But Brody also found that "the mere existence of state law variations is not alone sufficient to preclude class certification." Turning to the standard question that arise under Rule 23, Brody also looked to whether "common issues of fact overcome divergent legal issues."Brody found there were "substantial factual differences" among the proposed class members, due to the model of engine they purchased, the promises they relied on in doing so, and the possible outside causes of problems with the engines that were beyond Caterpillar's control. Such factual differences among the plaintiffs, when combined with the legal differences among the states, she said, was enough to preclude certifying the class. Finally, Brody said, the plaintiff's lawyers failed to show that a class action would be "superior" to individual litigation."Plaintiff has not demonstrated that common issues of law and fact predominate over individual issues. In addition, plaintiff fails to offer a workable plan as to how this litigation would be tried with respect to the numerous individual issues," Brody wrote. (The Legal Intelligencer, June 6, 2000) COCA-COLA: Chairman Remarked on Excessive Money Demands for Racism Suit ----------------------------------------------------------------------- Coca-Cola Chairman Doug Daft may have violated a court order by telling a reporter in Ireland that "totally excessive money demands" are making it more difficult for the company to settle a racial discrimination lawsuit. Daft's comments to Paul O'Kane, deputy business editor of The Sunday Tribune in Dublin, could violate an order prohibiting both sides from publicly talking about the settlement negotiations, which began in mid-April. "We're seeking an equitable and expeditious settlement," Daft told O'Kane in a taped, on-the-record interview. "I think you've seen enough in some of the other press to indicate that the settlement is difficult when it just becomes totally excessive money demands, financial demands. I won't comment on it, but there has been enough commentary about it." Daft's characterization of plaintiffs' monetary demands as excessive may have violated an order signed Feb. 8 by U.S. District Judge Richard Story requiring both sides to participate in confidential negotiations facilitated by a mediator. "What occurs during the course of the mediation shall be kept confidential among the named parties and their counsel and consulting experts," Story wrote in his order. But Coca-Cola spokesman Robert Baskin said the company doesn't believe Daft violated the order. "In his interview with an Irish newspaper reporter in Dublin, Mr. Daft did not comment on the mediation process, nor was he seeking to communicate with prospective class members," Baskin said, referring to plaintiffs' efforts to expand the case into a class-action suit against the company. "There is absolutely no violation of any court order." Plaintiffs' attorney Cyrus Mehri said he was "astonished" after learning of Daft's comments Monday. "Regardless of whether Mr. Daft violated the court's order or inaccurately characterized the proceedings, we will not comment on the substance of his statements," Mehri said. "From the get-go in this case, we have sought to achieve the twin goals of creating systemic changes in the company's practices and making fair amends for the past." Mehri would not comment on whether the plaintiffs would seek any legal remedy in the wake of Daft's remark. Legal experts said it is possible for the plaintiffs to seek sanctions against the company. On several previous occasions recently, including at the company's annual shareholders meeting in April, Daft said he could not comment on the ongoing negotiations because of the court order. In his interview with O'Kane, Daft did not specifically mention the monetary demand he thought was excessive. But he referred to former Coke manager Larry Jones, who has said $ 200 million would be an appropriate settlement for four plaintiffs and a prospective class of 2,000 current and former black employees in the United States. Jones, who is not a plaintiff in the case, has been organizing a boycott against the company to try to pressure it to settle the suit. "In fact, Larry Jones sort of put a number on the table the other day, which I thought was wrong to do," Daft told O'Kane. "But he's not involved in the settlement of the case. He's outside it." While Daft is not supposed to talk about negotiations, he is allowed to talk about the allegations in the lawsuit. In the interview, Daft described the suit as "a very unfortunate issue. I wish it was behind us. Nothing like this is good. It takes away energy from myself in terms of focus from other parts of the business. But it has to be settled, and we're trying to settle and have been for several weeks." Daft said the diversity concerns raised by the lawsuit probably stem from employees with individual issues unrelated to race. "It's probably just related to bad supervisors," Daft said. Later in the interview he added: "I would say that 99.9 percent of people know in their heart and in their mind that there is no (systemic) discrimination in the Coca-Cola Co. We're enormously diverse anyway. We have 215 nationalities that work in our organization." The company has denied the allegations in the suit, which contends that it has systematically discriminated against African-Americans in pay, promotions and performance evaluations. Aside from the monetary issues that may be affecting the settlement talks, another key issue concerns whether the plaintiffs' attorneys and the company can agree on the types of diversity policies and practices to establish for the future. (The Atlanta Journal and Constitution, June 6, 2000) FEN-PHEN: AHP Reveals Grand Jury�s Probe on FDA Reports of Adverse Drug ----------------------------------------------------------------------- American Home Products Corp. disclosed in a recent Securities and Exchange Commission filing that a federal grand jury is investigating whether the company adequately reported adverse drug events involving its brand-name diet drugs Pondimin and Redux to the FDA. FEN-PHEN: MDL Ct Hears Objections To AHP's Proposed $4.8 Bil Settlement ----------------------------------------------------------------------- U.S. District Judge Louis C. Bechtle held eight days of hearings from May 2 to May 11 before taking the decision under advisement over whether to grant final judicial approval to American Home Products Corp.'s proposed global settlement of thousands of diet drug lawsuits. His decision is expected sometime this summer. In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine) Products Liability Litigation, MDL No. 1203; Brown et al. v. American Home Products Corp. et al. , Ind. No. 99-20593, hearing ended (E.D. Pa., May 11, 2000); see Diet Drugs LR , May 2000, P. 3. The hearing featured more than three dozen legal, medical, and financial experts, plaintiffs, AHP representatives, and other witnesses testifying for and against the proposed $3.75 billion settlement. That amount is expected to grow to $4.8 billion over the 15-year life of the settlement process if Judge Bechtle approves it and it withstands any appeal. The settlement agreement, worked out in secret negotiations last fall, has been accepted by 200,000 plaintiffs. Another 45,000 have chosen to opt out and pursue individual suits against the pharmaceutical giant. No one knows how many diet drug users may ultimately qualify for inclusion in the settlement class and subclasses, but as many as four to six million people may have used the diet drugs fenfluramine and dexfenfluramine before they were voluntarily recalled from the market on Sept. 15, 1997. Objectors argued in court documents and at the hearing that the proposed settlement provides too little compensation to those injured by the drugs, that it does not cover certain categories of injuries and that it fails to satisfy the U.S. Supreme Court's requirements for establishing settlement classes in mass tort litigation. They also claimed that the settlement was fashioned in the best interests of AHP and the class counsel, not the plaintiff class members. Amchem and Ortiz In particular, the objectors contended that the proposed settlement does not comport with the Supreme Court's recent rulings in Amchem Products v. Windsor, 521 U.S. 591 (1997), and Ortiz v. Fibreboard , 527 U.S. 815, 119 S. Ct. 2295 (1999), both attempts to certify large settlement classes in asbestos litigation. In Amchem, the defendants offered a lump-sum payment that would have had to been allocated among different groups of plaintiffs, thus creating conflicts between the classes, including those already manifesting injuries and future claimants -- those who might not even have been aware that they had been exposed to asbestos and who might not develop symptoms for decades to come. In Ortiz, the parties attempted to bind all of the plaintiffs into a mandatory limited fund settlement class. In both cases, the Supreme Court found that the proposed settlements were inherently unfair, creating various internal conflicts among the class members. In this case, the plaintiffs' class counsel, led by Michael D. Fishbein of Philadelphia's Levin, Fishbein, Sedran & Berman , argued that they had met every objection raised by Amchem and Ortiz . In fact, Fishbein told the court on the first day of the hearings that the plaintiffs' attorneys were very mindful of Amchem from the beginning and had worked hard to structure the diet drug settlement so it would not run into the roadblocks posed by the Amchem ruling. In a letter to AHP during the months-long negotiations, he said they told the company, "If you want to do this, get serious, read Amchem and let's get back to the bargaining table and figure out what we're going to do. If not, that's okay. We're prepared to litigate." Here, class members will receive payments for medical monitoring or payments set forth in a matrix depending upon their age, exposure to the drugs and severity of their heart valve injuries. If plaintiffs who are currently asymptomatic later develop heart valve disease, they can then either accept the matrix payments or opt out and file their own personal injury suits against AHP. The company has also agreed not to mount any statute of limitations defenses in those cases. There is no lump sum to be divided among the class members, and no future claimants will be shut out of the settlement because they did not know they were injured. In addition, the settlement is not mandatory; potential class members can opt out at three different points. Exposure to diet drugs differs from exposure to asbestos, the settlement proponents point out, because the drugs had to be prescribed by a doctor; therefore, everyone knows whether they took the drugs and thus whether they were exposed. In addition, there can be no future claimants who can allege exposure to the drugs years from now because the drugs were withdrawn from the market in 1997. One of the class counsels' chief witnesses at the hearing was Columbia University law professor John C. Coffee Jr., a steadfast opponent of the proposed classes in Amchem and Ortiz, who nevertheless testified that he favors the proposed settlement class here. "This is a much tighter, less sprawling, less amorphous class," Coffee said, contrasting it with the Amchem class. Other witnesses appearing for the settlement class were financial experts who testified to AHP's financial condition and the appropriateness of the proposed settlement amounts; medical and scientific experts who testified to the link between diet drugs and the alleged injuries; and an attorney who testified that the negotiations were carried out in an adversarial manner and "at arms length," as federal rules require. A Fair Settlement In addition to meeting the requirements of Amchem and Ortiz, the class counsel argued, the proposed settlement also meets the fairness factors articulated by the U.S. Court of Appeals for the Third Circuit in Girsh v. Jepson, 521 F.2d 153, 156 (3d Cir., 1975), and its progeny. Those factors test whether the settlement class meets the requirements of Rule 23 of the Federal Rules of Civil Procedure regarding numerosity, commonality, typicality, adequacy of representation and the superiority of a class action over individual litigation. The settlement's proponents maintain that the litigation meets the test in Girsh in that it is complex, it is mature enough for the parties to determine that a settlement would be preferable to continuing with the suits and that there is a risk that plaintiffs may not be able to establish liability. In addition, the proposed settlement meets the Girsh requirement that it be fair and reasonable when compared to the amounts the plaintiffs may expect to recover at trial, they said. Some of the objectors had argued that the amounts of damages offered by AHP in the settlement were inadequate, given the verdicts that juries have returned or the settlement amounts that the company has paid in a handful of cases that have already come to trial. Class counsel responded that anyone who feels the settlement amounts are inadequate can join the 45,000 plaintiffs who have already chosen to opt out and take their chances at trial in hopes of obtaining similar verdicts or individual settlements. 'Meritless Objections' The objectors were represented by plaintiffs' attorney Edward Blizzard of Blizzard & McCarthy in Houston. Some 36 groups of plaintiffs filed objections initially, but by the time of the hearings, all but 10 objectors had withdrawn, leaving only a very small number of objectors out of 200,000 plaintiffs who chose to accept the settlement. Of those, the class counsel said, "Most of the objectors are present simply for the sake of their counsel's interest s. They stand as shills for their counsel who are attempting to use their clients' standing for their own self-interest to enhance their settlement posture with American Home Products." The class counsel contended that many of the objectors did not even know their attorneys were filing objections in their names and that if they had known about the terms of the settlement, they would not have objected to it. The objectors' arguments that the proposed settlement conflicts with laws in those states recognizing medical monitoring, that it conflicts with state laws regarding punitive damages or that it was negotiated solely so class counsel could collect as much s $429 million in attorneys' fees are all without merit, the proponents asserted. With respect to the attorneys' fees, class counsel and AHP set a maximum fee of $200 million out of the medical monitoring fund and $229 million out of the heart valve fund to compensate class counsel and other plaintiffs' attorneys. Those figures are simply a cap on the amount of fees attorneys may collect, the settlement proponents said. It will be up to the court to determine the actual amount each attorney will receive in accordance with how much time and effort each put into the litigation. In a post-trial order, Judge Bechtle ordered the parties to file findings of fact and law by May 19 and to file replies by May 23. He said he would schedule a final oral argument at a later date. (Diet Drugs Litigation Reporter, June 2000) FIRSTPLUS FINANCIAL: Ch 11 Class Claim Denied Prevents Single Claim ------------------------------------------------------------------- Consumers who believe they were overcharged for home mortgages may not seek compensation through a class proof of claim in the lender's Chapter 11 case, Judge Harold C. Abramson (Bankr. N.D. Tex.) ruled in Charles Kahler, et al. v. FirstPlus Financial, Inc. (In re FirstPlus Financial, Inc.), No. 99-31869-HCA-11, Adv. No. 99-3388 (April 26, 2000). Instead, the court treated the class proof of claim as a group proof of claim filed on behalf of the named plaintiffs. Charles Kahler and other consumers filed a federal class action complaint in California in 1998 alleging the mortgage originators, FirstPlus Financial Corp. and Capital Direct Funding Group Inc., improperly marked up charges for third-party vendor services. Specifically, they contended the mortgage originators: charged "excessive loan fees and interest; misrepresented that consumers were to receive competitive interest rates; improperly charged borrowers for third party related loan expenses (i.e., credit reports, appraisals, mortgage insurance, and flood certification); received kickbacks from some third party service providers; and manipulated and withheld loan disclosure documents to hide effective interest rates, loan costs, and fees." The class action was not certified when FirstPlus filed for bankruptcy protection. After the bankruptcy court denied the plaintiffs' request for stay relief in order to pursue their California action, the named plaintiffs in the action filed a proof of claim on behalf of themselves and the proposed class. The claim was based on the same course of conduct that led to the filing of the California complaint. All potential class members received notice by mail of the lender's bankruptcy and the bar date for filing claims. They were also provided with a blank claim form. In addition, notice of the filing and bar date were advertised in the Wall Street Journal and U.S.A. Today. Allowing class proofs of claim Rule 3001(b) requires creditors, or their authorized agent, to file a proof of claim. However, courts are divided as to whether a class representative is an authorized agent permitted to file class proofs of claims. The 7th Circuit Court of Appeals ruled that bankruptcy courts may allow the filing of class proofs of claim if the class representative obtains authorized agent status through Rules 9014 and 7023. Rule 9014 says in a contested case a court "may at any stage in a particular matter direct that one or more of the other rules ... shall apply." Rule 7023 makes Fed. R. Civ. Pro. 23, governing class actions, applicable to bankruptcy proceedings. The 7th Circuit allows a class representative to become an "authorized agent" by applying Rule 7023 to the Code's proof of claim provision. Other courts, however, follow Rule 3001(b) and the principles of agency to the letter, holding that an authorized agent is one who performs a delegable act, which the creditor could do himself. An agent is not "authorized" if he first files a proof of claim and then notifies the creditor. Following the minority rule The Texas bankruptcy court considered the appropriateness of a class action in a bankruptcy proceeding when the Kahler plaintiffs moved for class certification. Judge Abramson opined, "The chief purpose of a class action outside the bankruptcy context - to avoid litigation in a multiplicity of fora - is of little concern in the bankruptcy context since the bankruptcy court has jurisdiction over all claims against the debtor. Also, while there is a deterrent effect to class actions outside of bankruptcy, deterrence is less likely in bankruptcy because the incentive to monitor is destroyed by the lack of available funds, by the fact that the equity interests have been wiped out, and by the fact that the reputations of the managers have been tarnished no matter what happens in the class action." Admitting he was adopting the minority view, Judge Abramson held that Rule 3001(b) requires an authorized agency relationship to file a proof of claim and a class representative does not qualify as "authorized agent." Without the required agency relationship, the court ruled the class proof of claim was defective and could not be extended to anyone other than the named plaintiffs. The court barred the claims of any party who did not file an individual proof of claim and who received actual notice of the claims bar date. As previously stated, class actions apply to bankruptcy proceedings under Rule 7023. Thus, the Texas bankruptcy court addressed numerosity, commonality, typicality and adequacy of representation. It concluded that the Kahler class only demonstrated adequacy of representation. Although the plaintiffs claimed they satisfied the numerosity prong of Rule 23 because the proposed class had 30,000 potential members, the court held otherwise. It reduced the number of plaintiffs to 50 after determining class proofs of claims were inapplicable, only 2,000 individuals filed proofs of claim and only 50 of those claims remained after the claims adjudication process. Joinder of 50 claims, said the court, was not impractical. The court also held that the class failed to fulfill Rule 23's commonality and typicality elements. It ruled individual issues predominated because "each ... class member will have to prove the particular way in which they were defrauded and ... their reliance upon that fraud." Despite holding that the class failed Rule 23(a), the court nonetheless analyzed the motion for certification under Fed. R. Civ. Pro. 23(b). It considered whether a class action would be superior to resolving the plaintiffs' RESPA, TILA, RICO and state fraud claims on an individual basis. With regard to the plaintiffs' contentions that the mortgage originators violated the RESPA by paying yield spread premiums to third parties for services not actually performed, the court held it would be required to examine the defendant's conduct in each loan transaction. A case-by-case analysis of the loans would also be necessary to determine if a class member's claim complied with the act's one-year statute of limitations, said the court. Accordingly, Judge Abramson denied the motion for class certification of the RESPA claims. The court also ruled a TILA action is not suited for class treatment because individualized proof in necessary to obtain recession of the contract and to challenge the adequacy of the disclosures given in each transaction. (Consumer Bankruptcy News, May 30, 2000) G.A.D.R: NJ Ct Sends Dispute Over Hemophilia Settlement Back to IL ------------------------------------------------------------------ A New Jersey appellate panel has reversed a trial court order awarding $100,000 in proceeds from the national hemophilia class action settlement to the estate of a claimant who died before the money was allocated. F.F. v. G.A.D.R. et al., No. A-3717-98T1 (N.J. Super. Ct. App. Div., May 15, 2000). Although rejecting claims by the decedent's siblings that New Jersey courts lack the authority to decide who is entitled to the money, the panel said a family dispute over the proceeds should be resolved in the U.S. District Court for the Northern District of Illinois. There, it said, a process for settling disputes over allocation of "claimant group" shares was established as part of the huge 1996 blood products settlement and can be administered by special masters familiar with the fine points of the action. The instant dispute arose surrounding T.D., a hemophiliac who died of AIDS in August 1994, shortly after initiating a New Jersey Superior Court suit alleging he was infected with HIV by the tainted blood clotting factorate he used to control his bleeding. Sheparded by his sister, F.F., as executrix of T.D.'s estate, the suit continued as a wrongful death action on behalf of his siblings, and a survivorship claim for damages he incurred before his death. The case was removed to U.S. District Court in New Jersey and later transferred to the Northern District of Illinois for inclusion with the multidistrict blood products litigation overseen by U.S. District Court Judge John F. Grady. Following the October 1996 settlement of the class proceedings, F.F., as executrix, denied competing claims on the money by her other siblings and filed the instant New Jersey Superior Court for Middlesex County action claiming entitlement to the full $100,000 award under her status as sole beneficiary of T.D.'s estate. The decedents' other siblings (defendants) challenged her suit, claiming that any disputes over entitlement to the $100,000 must be resolved in Illinois, where the action was prosecuted and settled, and where Judge Grady established procedures designed to resolve such infighting by a decedent's "claimant group." The superior court, however, entered an order proclaiming that the settlement funds were "hereby awarded to the estate." On appeal, the defendants argued before the New Jersey Superior Court Appellate Division that the order improperly declared that the estate, not the defendants, are entitled to all of the funds; that it preempts them from arguing their right to at least a portion of the amount; and that final determination of the issue should rest in the Northern District of Illinois. The appeals court agreed with the defendants' final two contentions and reversed the lower court's declaration. It noted that the claim prosecuted in Illinois in the name of T.D. contained two "distinctly different" causes of action: one for damages suffered by the decedent prior to his death, a claim that is an asset of the estate under the New Jersey Survival Act (N.J. Stat. Ann. @ 2A15-3); and, under the New Jersey Wrongful Death Act (N.J. Stat. Ann. @ 2 A:31-1), a claim for the "benefit of the persons entitled to take any intestate personal property of the decedent." On the issue of jurisdiction, the appellate division said: D efendants maintain that the Superior Court in Middlesex County had no jurisdiction to hear this case. We doubt that is so. Our long arm jurisdictional rule is coextensive with constitutional due process jurisdictional limits. Were there a need to do so, we think it likely that New Jersey could be found to have sufficient contacts with this litigation to justify its exercising jurisdiction to hear and resolve the matter. "Comity does not rest on a lack of jurisdiction," the court added. "Rather, it rests on a voluntary recognition of pending judicial proceedings in another forum." The fact that the entire proceeding has, to date, unwound in Illinois, said the New Jersey panel, means that it would be most sensible for it to continue there, where the court "has procedures in place to deal with the present dispute." Shirley B. Whitenack and Peter A. Marra of Schenck, Price, Smith & King in Morristown, N.J., represent the cause for the defendants. F.F. is represented by Laura M. Le Winn of Princeton Junction, N.J. (AIDS Litigation Reporter, June 5, 2000) GLEN COVE: Watery Home Residents Form Tenant Council and Plan Lawsuit --------------------------------------------------------------------- Angry and frustrated for nearly a week since their watery homes were condemned, Glen Cove residents Monday united to form their first tenants' association. With politicians, preachers and attorneys at their side, about 100 displaced residents chose two women to lead the group. Now, they say, Glen Cove Condominium and Apartment's management, the complex's association and numerous landlords may listen to them and at least apologize for their homeless status. A planned class-action lawsuit, they say, will surely send a message. "Something has to happen. We just couldn't sit still with all this abuse," said Esther Johnson, a resident. Johnson and Linda Dorsey were elected chairwomen. After city officials declared two Glen Cove buildings unsafe, residents said they haven't seen or heard from property manager Michael Sims, who couldn't be reached by phone Monday. Attorneys at the meeting encouraged the residents, displaced after heavy rains sent their ceilings crashing and doused furniture and the buildings' electrical boxes, to keep documentation of all damages. Nearly 500 residents were forced to leave. Monday's meeting was called by Arthur Kennedy, chief of staff for U.S. Rep. Alcee Hastings, D-Miramar, after dozens of residents complained they were being rebuffed by Glen Cove's management. The 364-unit complex has a history of building code violations. Earlier Monday, and over the weekend, moving trucks jostled for space as families from the 120 condemned units were leaving. "It is very difficult. It was awful," said Sharon Williams, one of the few unit owners who still lives in her Glen Cove condominium. Work on the two vacant buildings, city officials say, could take anywhere from six weeks to four months, depending on how fast the complex's association seeks to remedy the situation. "We don't want to give false hope based upon the fact that it appears that some owners care more about their investment. This is a classic slumlord situation," said Lauderdale Lakes Community Development Director Michael Matthias. A Lauderdale Lakes building department representative said permits for repairs on Glen Cove's roof were applied for on Monday. (Sun-Sentinel (Fort Lauderdale, FL), June 6, 2000) INMATES LITIGATION: Ap Ct Hears Who Should Represent MS HIV Plaintiffs ---------------------------------------------------------------------- Mississippi prisoners' rights attorney Ron Welch has told a federal appeals court the American Civil Liberties Union had aggressively sought to replace him as lawyer for inmates with HIV. Welch and the ACLU appeared Monday before a three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans. Welch, of Jackson, Miss., said the ACLU sought to take control of a class-action lawsuit involving the HIV inmates in late 1998, during a period when Welch had not heard from the prisoners. A medical expert has testified that during the period in question, covering more than a year, prison doctors provided poor and outdated HIV treatment to inmates. Welch said he had interpreted the absence of contact with the inmates as a meaning there were no problems. In reality, he said, "they bypassed me and went to the other counsel." The ACLU is appealing several issues involving the lawsuit, including a lower court's ruling that Welch should remain as the court-appointed attorney. Jane Hicks, a Jackson lawyer with the ACLU, said the HIV inmates wanted to be represented by other attorneys. "It's about the rights of inmates to choose their counsel," Hicks said. The appeals court will rule later on the case. Inmates with HIV at the Mississippi State Penitentiary at Parchman signed a petition in December seeking Welch's removal. Attorneys for the ACLU's National Prison Project claim Welch was aware of inmates' complaints about medical treatment but ignored them. Welch said he received a letter from an inmate in March 1997 complaining about medical treatment. He said he was pursuing an administrative remedy that eventually made medical treatment for all state inmates the responsibility of the University of Mississippi Medical Center in Jackson. "My strategy worked. We got UMC," said Welch. The medical center in July 1998 began to provide treatment to state prisoners, including those with HIV. In March 1999, however, an expert for the ACLU testified at a lower court hearing that prisoners continued to receive substandard treatment that he described as dangerous. Combination therapy, a treatment that substantially prolongs the lives of many people with HIV, was widely accepted by the medical community by late 1996. In June 1997, the National Institutes of Health issued guidelines for combination therapy in treating HIV. In July, a federal magistrate ordered the state Corrections Department to implement the new therapy and report its progress to the court. Corrections Department attorney Leonard Vincent told the appeals court panel the state was in the process of implementing the new treatment. "We were doing exactly what the court ordered all along," Vincent said. Welch told the court that it was his responsibility to assess the veracity of prisoners' complaints and to protect the court from frivolous complaints. "This one wasn't frivolous," said U.S. District Judge Donald Walter. Vincent said the ACLU shouldn't receive payment because it had not been successful in its attempt to have the court appoint an independent medical expert. U.S. District Judge Fortunato Benavides said the fact Mississippi had speeded up implementation of treatment could be viewed as a success. "They got there a little faster, didn't they?" Benavides asked. (The Associated Press State & Local Wire, June 6, 2000) JACK IN: Settlements Resolve CA Accessibility Suit against Restaurants ---------------------------------------------------------------------- A federal lawsuit alleging that Jack in the Box restaurant locations were illegally inaccessible to individuals with disabilities has been resolved via the execution of three settlement agreements last month. The class action suit, filed by the Oakland-based Disability Rights Advocates, is similar to cases involving Wendy's International Inc. and Taco Bell Corp. Under the Jack in the Box settlements, which affect more that 50 franchise owners and 174 locations, improvements will be made relating to features such as restrooms, parking lots, and paths of travel. One of the settlement agreements addresses improvements at corporate-controlled locations, while the other two have been joined by franchise operators. Jack in the Box, headquartered in San Diego, operates and franchises more than 1,500 restaurants in 14 states. "We are pleased to see so many independent operators back up the commitment by Jack in the Box's corporate headquarters and make necessary improvements," said DRA attorney Melissa Kasnitz. "We expect people with disabilities who know they can count on accessible features at Jack in the Box Restaurants will be pleased to patronize the chain. Access is not just a civil rights obligation; it's also good for business." Fast food restaurants are clearly subject to the requirements of Title III of the ADA, and others have similarly settled charges that they failed to meet applicable accessibility requirements. In March, Taco Bell Corp. entered into an agreement designed to improve the accessibility of its Colorado restaurant locations. That suit, which also was a class action, focused heavily on the accessibility of the restaurant's queue lines. In August 1998, Wendy's International Inc. also entered into a settlement agreement that resolved a dispute concerning the alleged inaccessibility of its queue lines. To settle the case, Wendy's agreed to widen or eliminate the queue line system in its restaurants nationwide. (Disability Compliance Bulletin, June 2, 2000) LIPARI LANDFILL: NJ Superfund Site Needs Fund for Cancer -------------------------------------------------------- Responsible parties cleaning the Lipari Landfill Superfund site in Mantua Township, N.J., will have to create a fund to pay for medical attention of former residents near the site who have developed cancer if a court rules in favor of plaintiffs. On behalf of 3,000 former residents, including three ex-Girl Scouts, Harris Pogust of the Pennsauken, N.J., law firm, Sherman, Silverstein, Kohl, Rose & Podolsky, filed suit against the responsible parties of the Superfund site, claiming the contamination has caused undue harm against the plaintiffs. In January, N.J. Superior Court Judge John Holston certified the class for the class-action suit. Since then, the defendants' lawyers tried to appeal that decision, arguing the lawsuits should be individual cases, but the appellate court refused to hear the appeal. Briefs in the lower court case are not expected until mid-June, said Pogust. The suit began when several residents came to Pogust. One Girl Scout developed ovarian cancer while she was in her 20s and her brother had died from exposure to the site, he said. If the plaintiffs are successful in the suit, the companies would have to contribute money to pay for medical attention periodically over the next 10 years. "Other companies have voluntarily set up funds for this kind of thing, but so far we haven't seen it here," he said. Defendants have admitted to the contamination but argue that the injuries are not the result of the pollution. Their lawyers say the case has no merit and should be dismissed. The landfill is a 15-acre site that includes 6 acres of an inactive facility. From 1958 to 1971, the Lipari Landfill accepted municipal waste, liquid and semisolid chemical wastes, and industrial materials, according to EPA Region 2. The contamination includes solvents, paints, formaldehyde, dust residues, resins and solid press cakes. Responsible parties are addressing the site in four stages, officials said. Contacts: Harris Pogust, Sherman, Silverstein, Kohl, Rose & Podolsky for plaintiffs, (856) 662-0700; Rich Cahill, EPA, (212) 637-3666. IAC-ACC-NO: 62405648 (Hazardous Waste News, May 22, 2000) MORGAN STANLEY: Cited for Discrimination against Women Employees ---------------------------------------------------------------- A federal agency determined on June 5 that Morgan Stanley Dean Witter had discriminated against women working in one of its divisions, opening the door for lawsuits -- and possibly a class action -- against the firm. In one of the first investigations into pay and promotion practices at a big Wall Street investment bank, the Equal Employment Opportunity Commission said it had seen evidence of "a pattern and practice" of discrimination against women employed in Morgan Stanley's institutional stocks division. The case stems from a complaint filed with the commission in 1998 by Allison K. Schieffelin, a trader of convertible bonds, who said she had repeatedly been denied a promotion because of her sex. The commission said the evidence it had gathered supported Ms. Schieffelin's contention that less-deserving men had been promoted to the top rank of managing director while she had remained a principal. The commission also said it had found that the firm had retaliated against Ms. Schieffelin for making her complaints. A spokesman for Morgan Stanley, Ray O'Rourke, said: "We emphatically disagree with the findings of the commission. We do not practice or condone employment discrimination of any kind. We think the commission can only have misinterpreted the data that we gave them because the information shows no pattern of discrimination whatsoever." The determination signals that the commission may sue Morgan Stanley if the firm does not agree to a settlement. Litigation is a last resort for the commission; last year, it received 77,444 complaints and filed just 465 suits against employers. The commission has filed suit against some brokerage firms and some major corporations, including Mitsubishi Motors and the drugmaker Astra U.S.A., in recent years. But it has not disclosed any actions against major Wall Street firms in about a decade. In 1998, Mitsubishi agreed to pay $34 million to hundreds of women who worked in its auto factory in central Illinois and agreed to outside monitoring of complaints of harassment and discrimination. That settlement was easily the biggest of its kind, supplanting one the commission reached earlier that year with Astra, in which Astra agreed to pay $10 million, to admit that it had fostered a hostile work environment for women and to apologize. It is not clear what sort of settlement the commission will try to elicit from Morgan Stanley, but a monetary settlement could be substantial because employees in the division are highly paid. Managing directors at the firm can earn several million dollars a year, and they can hold those jobs for 10 years or more. In the 1970's, Merrill Lynch consented to the commission's monitoring of its hiring of women and minorities in its brokerage business. Recent high-profile sexual harassment and discrimination suits against Merrill Lynch and the Salomon Smith Barney unit of Citigroup were filed in federal court without intervention by the commission. In September, the commission demanded that Morgan Stanley turn over comprehensive records on hiring, pay and promotions in its institutional stocks division, in which Ms. Schieffelin has worked in her 14-year career. Neither the commission nor Mr. O'Rourke would describe the information the firm turned over. Wayne Outten, a lawyer in Manhattan who represents Ms. Schieffelin, said he had not seen the data but he believed the commission had received profiles of the division's employees going back about 15 years. He said there were other facts that supported Ms. Schieffelin's complaint, including that only 3 of 50 managing directors in the division were women and that senior executives of the firm had condoned and participated in firm-sponsored events from which women were excluded. Ms. Schieffelin is a golfer but was not invited to golf outings with clients, Mr. Outten said. She also contended in her complaint that the firm had paid for the entertainment of clients at strip clubs. But in its response to the commission, Morgan Stanley said that "entertainment at topless bars was at most infrequent." The commission also based its decision on information supplied by several other women who had worked at Morgan Stanley. Two women who worked in the same division as Ms. Schieffelin and now work at other investment banks corroborated her contentions in sworn statements, Mr. Outten said. He would not identify those women. Ms. Schieffelin filed her complaint with the commission after she was passed over for promotion as managing director in 1997. Since then, she has been passed over twice, Mr. Outten said. He said her year-end bonus for 1999 was substantial but "we believe that her bonus could have and should have been higher" and was adversely affected by the fact that she is a woman and she filed this charge. Mr. Outten said that going public with her complaint had had a harsh effect on Ms. Schieffelin's relationship with the firm and her co-workers. She has felt shunned and has been excluded from some extracurricular roles, including the recruiting of prospective employees and helping develop an online system for marketing new securities, known as an electronic roadshow. Ms. Schieffelin, 39, has declined to comment publicly on her case because Morgan Stanley's lawyers have warned that she could be disciplined or fired for talking to the news media without permission, Mr. Outten said. Mr. O'Rourke confirmed that Ms. Schieffelin would be violating the firm's policy if she talked about her case. (The New York Times, June 6, 2000) PEAK INTERNATIONAL: Reports Dismissal of Dorchester Investor Suit in NY ----------------------------------------------------------------------- Peak International Limited (Nasdaq: PEAKF; Amex: PTT) announced the voluntary dismissal of all claims against the company and its Vice President, CFO, Jerry Mo, in the Dorchester Investors purported class action lawsuit pending in the US District Court for the Southern District of New York. SEAGATE TECHNOLOGY: Faces 17 Securities Suits over Merger Agreement ------------------------------------------------------------------- On March 29, 2000, Seagate Technology, Seagate Software Holdings, Inc. and Suez Acquisition Company Limited, an entity affiliated with, among others, Silver Lake Partners and Texas Pacific Group entered into a Stock Purchase Agreement, and Seagate Technology, VERITAS and a wholly owned subsidiary of VERITAS entered into an Agreement and Plan of Merger and Reorganization. Following Seagate Technology Inc.�s announcement of the Veritas/Silver Lake transaction, a number of stockholders filed lawsuits against the Company, the individual members of the Board of Directors and certain executive officers in both Delaware and California. As of April 11, 2000, 17 complaints had been filed in the Chancery Court of Delaware. In California, three complaints were filed in Santa Clara County Superior Court and two complaints were filed in Santa Cruz County Superior Court. The complaints in these jurisdictions each allege that the members of the Company's Board of Directors breached their fiduciary duties to the Company's shareholders by entering into the Veritas/Silver Lake transaction. The complaints also allege that the Company's directors and executive officers have conflicting financial interests and did not secure the highest possible price for the Company's shares. All the complaints are styled as class actions, and seek to enjoin the Veritas/Silver Lake transaction and secure damages from all defendants. The Company believes that none of the lawsuits has any merit and intends to defend all these claims vigorously. Reorganization On October 20, 1999, the stockholders of Seagate Software, a majority-owned subsidiary of the Company, approved the merger of Seagate Daylight Merger Corp., a wholly-owned subsidiary of the Company, with and into Seagate Software. Seagate Software's assets consisted of the assets of the Information Management Group and its investment in the common stock of VERITAS Software Corporation. The merger was effected on October 20, 1999. As a result of the merger, Seagate Software became a wholly-owned subsidiary of the Company. In connection with the merger, Seagate Software's stockholders and optionees received payment in the form of 3.23 shares of the Company's common stock per share of Seagate Software common stock less any amounts due for the payment of the exercise price for such options. All outstanding Seagate Software stock options were accelerated immediately prior to the merger. Seagate Technology issued 9,124,046 shares to optionees and minority stockholders of Seagate Software. In connection with the reorganization, Seagate Software also formed a wholly-owned subsidiary that assumed the name "Seagate Software, Inc." ("Software Operating Company"). Seagate Software transferred the IMG assets into Software Operating Company. This new company, Software Operating Company, is now the operating entity for the IMG business. In October 1999, a new stock option plan was established for Software Operating Company, and employees of the IMG business are eligible to participate in the plan. During the quarters ended October 1, 1999 and December 31, 1999, Seagate Software sold 18,523,502 and 9,000,000 shares, respectively, of VERITAS common stock, adjusted for 3 for 2 stock splits on November 22, 1999 and March 6, 2000, for proceeds of $397 million and $437 million, respectively, net of underwriting discounts and commissions. Seagate Software acquired such shares in connection with the contribution of its Network & Storage Management Group business to VERITAS in May 1999. The sale of shares of VERITAS common stock by Seagate Software in the quarters ended October 1, 1999 and December 31, 1999 resulted in pre-tax gains of $193 million and $344 million, respectively. As of March 31, 2000, Seagate Software held approximately 33% of the outstanding common stock of VERITAS. The Company accounts for its investment in VERITAS under the equity method and records its equity interest in VERITAS' net income (loss) on a one-quarter lag. TOBACCO LITIGATION: Financial Expert Said Industry Is Worth $157 Bil -------------------------------------------------------------------- The nation's five biggest cigarette makers are worth $157 billion domestically and have a ''strikingly rosy'' future, a financial expert testified Tuesday for smokers seeking punitive damages from the tobacco industry. George Mundstock, a professor of finance at the University of Miami law school, said the tobacco companies could raise that amount in six months by Wall Street borrowing or selling themselves. The dollar figure is key testimony for a jury considering how much to award 300,000 to 500,000 sick Florida smokers to punish the industry for decades of misconduct. The jury in the case the nation's first class-action lawsuit by smokers to go to trial previously ruled that the industry makes a dangerous product. Mundstock estimated the worth of Philip Morris' domestic and foreign cigarette business at $118 billion. But he agreed when company attorney Brad Lerman said, ''They don't have their hands on that cash today.'' Lerman said that amount isn't something the company could pay in 30 days. The industry fears a crippling award even though Florida law does not allow a punitive damages verdict to put a company out of business. During the punitive damages phase, the cigarette companies lost a fight to keep the jury from considering their borrowing power, and the smokers' attorney has stressed the industry's ability to raise prices. Wholesale cigarette prices are up 58 percent and sales are down 9 percent since the tobacco companies settled lawsuits with states in 1998 for $254 billion, Mundstock testified. The settlements are called the MSA, for Master Settlement Agreement. ''In the post-MSA world, things are really looking strikingly rosy,'' he said of tobacco finances. Mundstock offered values for the domestic tobacco companies, based in part on their share of the domestic market. He concluded that Philip Morris, with 49 percent of the market, is worth $80 billion; R.J. Reynolds Tobacco Co., with 24 percent, $36 billion; Brown & Williamson Tobacco Corp., with 14 percent, $22 billion; Lorillard Tobacco Co., with 11 percent, $17 billion; and Liggett Group Inc., with 1 percent, $1.8 billion. (AP Online, June 6, 2000) TOBACCO LITIGATION: Philip Morris Will Drop Magazine Ads Read By Youths ----------------------------------------------------------------------- Bowing to legal pressure, tobacco giant Philip Morris Cos. said it will pull advertising from about 40 magazines with large youth readership, including such major showcases for its brands as Rolling Stone and Sports Illustrated. The move by the top U.S. cigarette maker is intended to blunt fallout from a probe by state attorneys general who are investigating whether tobacco firms have violated a 1998 settlement agreement by pitching their brands to youths. The companies agreed in the $ 246-billion settlement to eliminate tobacco billboards, but have since significantly stepped up their print advertising. Michael Szymanczyk, president of Philip Morris USA, said in a letter to Washington Atty. Gen. Christine Gregoire, a leader of the states, that the firm will no longer advertise in any publication with a readership that is at least 15% younger than 18, the legal age to smoke, or that has more than 2 million readers younger than 18. The move was applauded by Gregoire and by Matt Myers, head of the National Center for Tobacco-Free Kids, who said it appeared to be a "positive step forward that other companies should follow." But Philip Morris dominates the industry with a 51% market share, and any general reductions in advertising will tend to lock in its commanding position. No. 2 tobacco company R.J. Reynolds Tobacco Co., which in recent years has slipped ever further behind Philip Morris, quickly announced that it will not follow the bigger firm's lead. In a prepared statement, RJR said reductions in cigarette advertising will not affect youth smoking, "but will absolutely have enormous impact on our ability to communicate with and compete for adult smokers." The firm, which has ceased advertising in certain youth-oriented publications, said the settlement agreement permits advertising as long it does not "directly or indirectly target youth." Announcement of the probe by the attorneys general came at a particularly bad time for the industry, which is battling to avert a potentially crushing punitive-damages award in the landmark Engle class-action case in Florida. In the trial's punitive-damages phase, which began last month, the companies are trying to convince jurors that they have reformed their marketing practices, and that therefore punitive damages are not warranted. Szymanczyk is expected to testify in the case within the next few days, and may be questioned about the attorneys general probe. (Los Angeles Times, June 6, 2000) TUBE TURNS: Insurance Carrier Defends Coker Plant Explosion Suit ---------------------------------------------------------------- Sypris Solutions Inc. discloses in its SEC report that Tube Turns Technologies Inc., a wholly owned subsidiary of the company, is a co-defendant in two separate lawsuits filed in 1993 and 1994, one pending in federal court and one pending in state district court in Louisiana, arising out of an explosion in a coker plant owned by Exxon Corporation located in Baton Rouge, Louisiana. The suits are being defended for Tube Turns by its insurance carrier, and the Company intends to vigorously defend its case. The Company believes that a settlement or related judgment would not result in a material loss to Tube Turns or the Company. According to the complaints, Tube Turns is the alleged manufacturer of a carbon steel pipe elbow which failed, causing the explosion which destroyed the coker plant and caused unspecified damages to surrounding property owners. One of the actions was brought by Exxon and claims damages for destruction of the plant, which Exxon estimates exceed one hundred million dollars. In this action, Tube Turns is a co-defendant with the fabricator who built the pipe line in which the elbow was incorporated and with the general contractor for the plant. The second action is a class action suit filed on behalf of the residents living around the plant and claims damages in an amount as yet undetermined. Exxon is a co-defendant with Tube Turns, the contractor and the fabricator in this action. In both actions, Tube Turns maintains that the carbon steel pipe elbow at issue was appropriately marked as carbon steel and was improperly installed, without the knowledge of Tube Turns, by the fabricator and general contractor in a part of the plant requiring a chromium steel elbow. WATER CONTAMINATION: Scramble under Way to Launch Actions --------------------------------------------------------- The tragic water contamination in Walkerton, Ontario last month will give rise to a considerable amount of civil litigation -some of it individual statements of claim, but very probably a class action or two as well. The Lawyers Weekly asked Kirk Baert, of the Toronto law firm McGowan and Associates, which specializes in class action cases, about the factors that determine whether a case is pursued individually or as a class proceeding. "When you want to bring a class action you just issue a statement of claim in the normal way, pursuant to the Class Proceedings Act,"Baert said. "Then you have to bring a motion within 90 days for certification, which requires a five-part test. Until you're certified, it's only a tentative class proceeding. You have to show common facts, or common issues of law, and that a class proceeding would be the preferable way to resolve them." Baert disagreed that "the race was on"to pick up some of the legal business that Walkerton will generate. "It doesn't matter who's first and who's last,"Baert said. "That has nothing to do with the test. If you have four or five different cases that have all been started as class actions, it's going to be up to the judge who hears those motions to decide how to deal with a multiplicity of lawsuits. For example, they may have to be consolidated into one case, or some of them may be stayed, or a combination of the two." Baert said he thought that the Walkerton cases would ultimately be consolidated under the control of one judge. "You only need one [individual plaintiff] to start a class action, but you have to go through this screening process called certification. It's a five-part test that turns a regular action or an intended class proceeding into a formal class proceeding." In the Walkerton situation, Baert said that a case in which the family breadwinner has died is going to be worth pursuing individually, because there will likely be a lot of money at stake. Class action, on the other hand, "was intended for cases that are either too small to pursue individually, or the amount that it would cost to pursue it individually would be so great that it's necessary to spread it around among class members." Thus, if a number of people have just fallen ill and missed a few days of work, they would likely be better served by consolidating their cases into a class action. "It's not worth it to sue someone for $5,000 in Ontario. No reputable lawyer would do it." Baert said he'd attended a recent conference at which a judge commented that a lot of people start class actions without really knowing what they're doing. "It's not an area for dabblers,"Baert said. "People think 'Oh, I'll just start this, I'll get my name in the paper,'and then a week later they don't know what they're supposed to do next. They think...the defendant is going to call them up and say 'Who do I make the cheque out to?'That is not what happens. The defendant is going to fight to the death." London lawyer Scott Ritchie said his firm, Siskind Cromarty, was invited to Walkerton by a local lawyer who knew the firm had some class action experience. Regarding the need for speed, "if I'm going to take an action on, I'm not going to push handcuffs on myself by starting my investigation late,"said Ritchie. "Evidence deteriorates very rapidly, for a lot of different reasons. Time is one of those reasons. People talk things over in the presence of other people, and all of a sudden, that freshness, that spontaneity disappears, and it becomes packaged. You also have limitation periods in this case that are pretty darned short." (The Lawyers Weekly, June 9, 2000) WATER CONTAMINATION: Seattle Atty. Warns of E. Coli Risk to Americans --------------------------------------------------------------------- Americans relying on rural and small municipal water systems are just as likely to become victims of the deadly E. coli bacteria as are Canadians like those in Walkerton, Ontario, says Seattle attorney William Marler of Marler Clark, who represents victims of outbreaks of food and water-borne illnesses. "Canadian officials are embarrassed that 11 people have been killed and hundreds injured in Walkerton, Ontario from drinking municipal water carrying animal manure laced with E coli," Marler said. "American health, environmental and water officials should be just as embarrassed given the record. People in both countries have an absolute right to safe, clean drinking water and not all are getting it. Why our public officials cannot learn from history shocks me," continued Mr. Marler. Selected History of E. coli Contamination in Public Drinking Water: 1999 Washington County Fair (New York) Outbreak - 781 people sickened, 2 deaths and 71 hospitalized. Source was contaminated, untreated well water. 1998 Wyoming Outbreak - 157 people sickened. Source was contaminated, untreated groundwater. 1998 Illinois Outbreak - 3 people sickened. Source was contaminated, untreated groundwater. 1997 Washington State Outbreak - 4 people sickened. Source was contaminated water caused by treatment deficiency. 1995 Minnesota Outbreak - 33 people sickened at a summer camp. Source was attributed to flooding from heavy rains and to an improperly constructed spring. 1990 Cabool, Missouri Outbreak - 243 people sickened, 4 deaths and 2 developed hemolytic uremic syndrome. Source was contaminated, unchlorinated municipal water supply. What are the symptoms of E. coli O157: H7? After someone ingests a sufficient quantity of E. coli O157: H7, the bacteria travels through the stomach and small intestine, and then attaches itself to the inside surface of the large intestine and causes inflammation of the intestinal wall. This inflammatory reaction is caused by toxins secreted by the bacteria, and is believed to be the cause of hemorrhagic colitis. Hemorrhagic colitis is characterized by the sudden onset of abdominal pain and severe cramps, followed within 24 hours by diarrhea. As the disease progresses the diarrhea becomes watery and then grossly bloody -- bloody to naked eye. Vomiting can also occur, but there is usually no fever. The incubation period for the disease (i.e., the period from ingestion of the bacteria to the start of symptoms) is typically 3 to 9 days, although shorter and longer periods are not that unusual. An incubation period of less than 24 hours would be unusual, however. Although most people recover from an E. coli O157: H7 infection, about 5-10% of infected individuals goes on to develop hemolytic uremic syndrome ("HUS"), a severe life-threatening complication. HUS was first described in 1955, and is now recognized as the most common cause of kidney failure in childhood. E. coli O157: H7 is responsible for over 90% of the cases of HUS that develop in North America. In fact, some researchers now believe that E. coli O157: H7 is the only cause of HUS in children. HUS is believed to develop when the E. coli O157: H7 enters into the circulation through the inflamed bowel wall, releasing a specific chemical known as shiga-like toxin (SLT). SLT, and probably other chemical mediators, attach to receptors on the inside surface of blood vessel cells (endothelial cells). Some organs appear more susceptible than other to the damage caused by these toxins, possibly due to the presence of increased numbers of toxin-receptors. These organs include the kidney, pancreas and brain. There is no known therapy to halt the progression of HUS. The active stage of the disease usually lasts one to two weeks, during which a variety of complications are possible. HUS is a frightening illness that even in the best American medical facilities has a mortality rate of about 5%. By comparison, the mortality rate in the developing world is much higher. About 50% of patients require dialysis due to kidney failure, 25% develop pancreatitis, 25% experience seizures, and 5% suffer from diabetes mellitus. The majority of HUS patients requires transfusion of blood products and develops complications common to the critically ill. The illness is a living nightmare for the patients and families, and leaves a painful memory that lingers long after the acute illness had passed. Among survivors of HUS, about five percent will eventually develop end stage kidney disease, with the resultant need for dialysis or transplantation, and another five to ten percent experience neurological or pancreatic problems which significantly impair quality of life. Since the longest available follow-up studies of HUS are about twenty (20) years, an accurate lifetime prognosis is not available, and as such, medical follow-up is indicated for even the mildest affected cases. Contact: Marler Clark Bill Marler, 206/346-1888 www.marlerclark.com * 35% of People Surveyed Think it's OK to Inflate Insurance Claims ------------------------------------------------------------------ A significant number of Americans surveyed -- 35 percent-believe that it all right to exaggerate insurance claims under certain circumstances, according to a recent Insurance Research Council (IRC) survey. These respondents agreed that it is acceptable to increase the amount of an insurance claim by a small amount to make up for a deductible. Nearly one in four respondents (24 percent) said that it is acceptable to increase the amount of a claim to make up for insurance premiums paid when no claims were made. The IRC has been tracking public tolerance for claims padding for many years. The 2000 results show fewer respondents accept this type of insurance fraud than did in 1997, when the acceptance level surged. However, the percentage of Americans surveyed believing that it is all right to exaggerate a claim to make up for the deductible is higher in 2000 than in any year before 1997. "Insurers have been making significant efforts to fight fraud," according to Elizabeth A. Sprinkel, senior vice president who heads the IRC. "While we have seen some improvement in recent years, it is still disappointing that so many Americans still see this type of insurance fraud as acceptable." The results contained in IRC's recently released report, Public Attitude Monitor 2000, Issue 1, were based on a survey conducted by Roper Starch Worldwide. The survey consisted of telephone interviews with 1,000 men and women 18 years old and older conducted in February 2000. Survey participants were selected to be representative of the population of the continental U.S. The survey also addressed attitudes towards class action lawsuits and third party bad faith lawsuits. For more detailed information on the study's methodology and findings, contact Elizabeth Sprinkel by phone at (610) 644-2212, ext. 7568; by fax at (610) 640-5388; or by e-mail at irc@cpcuiia.org. Or visit IRC's Web site at www.ircweb.org . Copies of the study are available at $10 each in the U.S. ($20 elsewhere) postpaid from the Insurance Research Council, 718 Providence Rd., Malvern, Pa. 19355-0725. Phone: (610) 644-2212, ext. 7569. Fax: (610) 640-5388. The Insurance Research Council is a division of the American Institute for CPCU and the Insurance Institute of America. The Institutes are independent, nonprofit organizations dedicated to providing educational programs, professional certification, and research for the property and liability insurance business. The IRC provides timely and reliable research to all parties involved in public policy issues affecting insurance companies and their customers. The IRC does not lobby or advocate legislative positions. It is supported by leading property and liability organizations. (Source: Insurance Research Council) * Most Americans Surveyed Favor Reform of the Class Action System ----------------------------------------------------------------- The majority of respondents to a recent Insurance Research Council (IRC) survey of U.S. households support changes in the way that class action lawsuits are handled. Seventy percent of survey respondents agreed that significant reform of the class action lawsuit system is needed. Class action lawsuits are legal actions filed by a few individuals on behalf of a large number of people who together attempt to obtain a legal remedy for some alleged wrong. Two common examples of class actions are consumer class actions (in which the plaintiffs contend that a business has engaged in fraudulent business practices) and mass tort class actions (in which the plaintiffs allege that the defendant has caused them personal injury or property damage). Forty-four percent of respondents in IRC's recent survey said that the number of class action lawsuits today is too high. Only six percent said that the number is too low. Similarly, 41 percent of respondents said that the average size of awards in class action lawsuits is too large, while only 10 percent said that awards are too low. The survey revealed an interesting dichotomy in the public's views of class action lawsuits. Most respondents (76 percent) agreed that class action lawsuits give average people the ability to act against big corporations with large legal resources. Interestingly, however, nearly as many respondents (73 percent) believe that class action lawsuits generate a lot of money in legal fees but produce little monetary benefit for the people suing. "Americans have mixed views about class action lawsuits," according to Elizabeth A. Sprinkel, senior vice president who heads the IRC. "While they show concern about individuals' ability to seek compensation from large organizations, they worry about the number and size of awards of class action lawsuits as well as the share of settlements that attorneys claim." The results contained in IRC's recently released report, Public Attitude Monitor 2000, Issue 1, were based on a survey conducted by Roper Starch Worldwide. The survey consisted of telephone interviews with 1,000 men and women 18 years old and older conducted in February 2000. Survey participants were selected to be representative of the population of the continental U.S. The survey also addressed attitudes towards third party bad faith lawsuits and insurance fraud. (Source: Insurance Research Council) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *